Different Indicators Providing Divergent Positions
While yesterday’s home sales printed at the highest levels since 2008 after recording an 87% sales increase in the American Northeast, durable goods orders dropped 1.8% from their previous reading and a manufacturing PMI that is at a 2-year low. The dichotomy becomes critical with the US Federal Reserve hinting at a September interest rate liftoff – currently being seen as a 50-50 proposition by FOMC voting member, Jerome Powell. Although the core durable goods orders figure rose 0.5%, the regular number’s plunge was accompanied by a revision of May’s results lower to -1.5%, primarily thanks to the April bounce. Analysts are expecting the downwards correction in real data to stay in place and persist especially amid the rally in the US dollar.
Major crude benchmarks climbed yesterday as a result of data on inventory withdrawals by the American Petroleum Institute, leaving the asset’s consolidation pattern intact between major support & resistance levels. The API reported a 3.2 million barrel decline in stockpiles, versus earlier expectations of a 2.3 million barrel draw, with 6 out of the last 8 readings demonstrating the decline. Even if Saudi and Libyan output increase and Alaskan wells resume pumping, crude oil is expected to maintain higher levels, in spite of possible downside threats. The price of WTI increased by 3% from intraday lows just before the announcement, then retreated slightly overnight, with Brent mirroring the pattern and tracking WTI momentum.
Today’s minutes released from the last meeting of BoJ policymakers indicate that QE measures are to remain in place, although concern was expressed regarding inflation. Estimates show that the 2% target will be attained during the first half of 2016; however diminishing marginal returns of the program remain a threat. As signs of recovery become clearer, the Japanese population seems to be losing their confidence and patience as Prime Minister Shinzo Abe rapidly loses popularity amongst voters. In spite of the possibility of early elections, the USDJPY pair rebounded overnight from recent weakness, thanks to a rising USD.